2009-2010 Annual Report
Office of Internal Auditing
– Page Intentionally Blank –
DIRECTOR’S MESSAGE
Greetings:
This year has been another very productive
year. When joining the department 3 years
ago, I committed to providing internal
auditing and consulting services designed to
assist the Board in its oversight
responsibility. As a result, we established
several long and short term goals and
objectives. This year marked the fulfillment
of many goals and objectives. For example,
we:
Added an additional staff member
Implemented a campus wide risk
assessment process
Created better transparency by providing
all Finance & Audit Committee (FAC)
members with copies of redesigned audit
reports
Integrated information technology audit
techniques into all audit engagements
Began meeting with the FAC Chair on a
regular basis
And, extended student learning beyond
the classroom by employing students in
functions parallel to their educational
background.
As in past years, we received the full
support and cooperation from all levels of
personnel and management in facilitating
our audits and promptly addressing audit
concerns.
It has been my pleasure to be of service to
the Board of Trustees.
Robert Berry
TABLE OF CONTENTS
Director’s Message 3
Table of Contents 3
Executive Summary 4
Introduction 5
Personnel/Proficiency/Professional
Development 6
Resources – Allocation & Analysis 8
Client Feedback 11
Outstanding Issues & Follow Up 13
Fraud Allegations & Investigations 14
Quality Assurance & Improvement 15
Performance Measurements ............. 16
Mandatory Disclosures 17
Appendix 18
Audit Report Summary ..................... 18
2010 Annual Report
4 Office of Internal Auditing | University of North Florida
EXECUTIVE SUMMARY
Each year, the Board and Senior
Management allocate resources to the Office
of Internal Auditing (OIA) that are to be
used in the effective and efficient execution
of audit, consulting and investigative
services.
During the 2010 fiscal year, authorized
personnel resources totaled 4 (3 audit
professionals and 1 administrative support).
The department experienced a loss of 1
person and remains at 67% of authorized
audit professional personnel capacity. Staff
members are seasoned professionals with
sufficient experience, credentials and
continuing education to effectively execute
duties and responsibilities.
In summary, the Office of Internal Auditing
utilized 2010 resources as follows:
Completed 4 in-depth audit
engagements. According to
benchmarking statistics, this completion
rate is commensurate with the size of the
department.
Successfully managed the fraud hotline
and responded to 7 submitted
allegations.
Completed 10 management advisory
service engagements.
Performed follow up on outstanding
audit issues and determined that
management effectively resolved 96% of
all open items.
Extended student learning beyond the
classroom by providing jobs to 2 School
of Computing students.
Solicited feedback from clients and
scored 4.62 on a scale of 1 through 5.
Began integrating clients into the annual
risk assessment process.
Completed an average of 50 hours of
professional development training.
Achieved a vast majority of performance
measurement goals.
The 2010 fiscal year was a successful year
and we look forward to productive 2011.
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University of North Florida | Office of Internal Auditing 5
INTRODUCTION
The Office of Internal Auditing assists the Board by providing services designed to evaluate the
organization’s risk mitigation policies, procedures and practices. In order to perform the role
effectively, organizational independence from management is required. As a result, the OIA
reports functionality to the Board via the Finance and Audit Committee and administratively to
the University President. Internal Auditing’s support role is best expressed by the following
definition from the Institute of Internal Auditors:
This report is the Office of Internal Auditing’s Annual Report to the Board of Trustees (the
Board) for the 2009 – 2010 fiscal year. Contained herein is information regarding Office of
Internal Auditing personnel such as education and professional development, financial resources,
audit engagements, open items follow up, and performance measurements.
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6 Office of Internal Auditing | University of North Florida
PERSONNEL/PROFICIENCY/PROFESSIONAL DEVELOPMENT
The University of North Florida has
numerous operational functions that span a
multitude of industries and disciplines.
Therefore, it is essential that the Office of
Internal Auditing contains a group of
professionals with diverse backgrounds and
experiences.
During the fiscal year, we added 1 employee
and lost 1 employee. Although authorized for
3 professional audit positions, the department
is currently staffed by 1 Director, 1 Senior
Auditor and 1 Administrative Assistant and
therefore we are at 66% of authorized
capacity for professional audit staff.
Department personnel maintain several
professional designations such as Certified
Internal Auditor (CIA), Certified Public
Accountant (CPA), Certified Information
System Auditor (CISA), Certified
Compliance & Ethics Professional (CCEP)
(see right). These designations require
continuous professional development. This
ensures staff is adequately trained and allows
us to keep abreast of current industry trends.
Figure 1 - Organizational Chart
Certified Internal Auditors
Certified Public Accountant
Certified Ethics & Compliance Professional
Certified Information Systems Auditor
DirectorRobert Berry
Senior AuditorBrian Endee
Senior AuditorOpen Position
Student WorkerOpen Position
Administrative Assistant
Dorothea Kent
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University of North Florida | Office of Internal Auditing 7
“
Ultimately, professional development enables
us to provide our clients the best service
possible. The department’s goal is to provide
at least 40 hours of training per employee per
year. Personnel averaged 50 training hours
during the year.
The Office of Internal Auditing takes great
strides to ensure training and professional
development is directly related to and
applicable in a higher education environment.
As a result, we attended training provided by
relevant reputable organizations such as:
The Association of College & University
Auditors
National Association of College and
University Business Officers
The Institute of Internal Auditors
Additionally, staff members completed 2 post
graduate courses in the Coggin College of
Business.
Professional development subject areas
included university governance, Clery Act
compliance, sponsored projects, financial aid
and athletics.
Professional
development enables us
to provide our clients
the best service
possible.”
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8 Office of Internal Auditing | University of North Florida
RESOURCES – ALLOCATION & ANALYSIS The Office of Internal Auditing (OIA) has a budget of approximately
$282,000. A vast majority of funding is allocated to salaries and wages
for the 3 audit and 1 support positions. Approximately 4% of funding is
allocated to operating expenses such copying, telephone, supplies,
training and travel.
The addition of one new staff member resulted an increase in salaries
and wages trending (see Figure 3). However, the current state of the
global economy has led to a sharp decrease in the operating budget
(Figure 4). As with other campus units, the OIA has made appropriate
adjustments in response to recent budget reductions.
Figure 2 - Budget Allocation Graph
Figure 3 - Salaries & Wages Trend Figure 4 - Operating Expenses Trend
95.96%
0.33%
0.60%0.53%0.14%
0.40%
0.95% 1.08%
0.01%4.04%
Salaries & Wages Supplies/Postage Telephone
Copy/Fax/Scanner Reference Materials Dues/Subscriptions
Training Travel Miscellaneous
0.00
150,000.00
300,000.00
2007 2008 2009 2010
Salaries & Wages
0.00
10,000.00
20,000.00
30,000.00
2007 2008 2009 2010
Operating
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University of North Florida | Office of Internal Auditing 9
The Office of Internal Auditing performs Internal Audits,
Management Advisory Services, Investigations and Follow
Up on outstanding audit issues. Ideally, a majority of the
time allocation should be in the Internal Audit category.
The 2010 fiscal year began with approximately 4,000 direct
audit hours. As a result, we developed a program budget
allocating the hours among audit services as displayed in
Figure 5 - Time Allocation Trend. As evidenced, the
major focus was internal audit engagements. However, due
to the loss of one employee during the period, actual hours
dedicated to performing various audit activities totaled
approximately 2,500 and were less than budget.
Fortunately, the loss in personnel did not affect the
department’s ability to focus primarily on internal audit
engagements. As evidenced in Figure 6 – Actual Time
Allocation, approximately 78% of resources were allocated
to the performance of internal audit engagements.
Figure 5 - Time Allocation Trend
Figure 6 – Actual Time Allocation
0
500
1000
1500
2000
2500
3000
Internal Audits Advisory Services
Investigations Follow Up
2640
851499
250
1892
39049 95.5
Budgeted Hours Actual Hours
78%
16%
2% 4%
Internal Audits Advisory Services Investigations Follow Up
2010 Annual Report
10 Office of Internal Auditing | University of North Florida
While successfully focusing core activities
on internal audit engagements, the Office of
Internal Auditing (OIA) completed 4
internal audit engagements during the year.
Typically internal audit engagements
involve an in-depth evaluation of a function
or process including financial and data
integrity, compliance with applicable laws,
rules and regulations, information
technology usage and
effectiveness/efficiency of operations. The
audit engagement completion status is
commensurate with the current size and
composition of the Office of Internal
Auditing.
In addition to the audit engagements, the
OIA also completed 10 Advisory Services
and addressed 7 fraud allegations.
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University of North Florida | Office of Internal Auditing 11
CLIENT FEEDBACK
The Office of Internal Auditing solicits feedback from audit clients at the conclusion of each
engagement. Customer satisfaction surveys measure the client’s perceived value of our audit
services. The customer satisfaction survey provides feedback regarding the audit scope,
auditor’s technical knowledge, effectiveness of communications, report clarity and usefulness
and the auditors’ professionalism.
4.62 on a scale of 5
Client satisfaction is one of the Office of Internal Auditing’s
Performance Measures. Our 2009 – 2010 fiscal year goal
was to obtain an average client satisfaction rating of “3” on a
scale of 1 through 5. We are pleased to report our actual results
showed an average rating of 4.62.
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12 Office of Internal Auditing | University of North Florida
The following tables displays detailed results of the client feedback survey divided into three
logical areas.
Figure 7 – Client Feedback Details
Audit Planning Score
*Audit purpose and scope clearly communicated to management 4.83
*Management requests/concerns incorporated in the audit 4.33
*Audit scope covered critical functions/risks 4.83
Average 4.67
Audit Process and Reporting Score
*Feedback to you on emerging issues during the audit 4.67
*Accuracy of the audit issues 4.50
*Duration of the audit 3.50
*Clarity of the report 4.67
*Usefulness in improving business processes and controls 4.83
*Communication of results 5.00
Average 4.53
Audit Staff – Knowledge, Professionalism & Objectivity Score
*Objectivity of the internal auditors 4.67
*Professionalism of the auditors 4.83
*Knowledge of your industry/organization/processes 4.33
*Quality of relationship and rapport between audit and your department 5.00
Average 4.71
Total Score 4.62
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University of North Florida | Office of Internal Auditing 13
OUTSTANDING ISSUES & FOLLOW UP
Standards for the Professional Practice of
Internal Auditing, promulgated by the
Institute of Internal Auditors, state, “The
chief audit executive must establish and
maintain a system to monitor the disposition
of results communicated to management.”
Additionally, “The chief audit executive
must establish a follow-up process to
monitor and ensure that management actions
have been effectively implemented or that
senior management has accepted the risk of
not taking action.”
All Office of Internal Auditing’s (OIA) audit
reports include control issues along with
management action plans and the estimated
time for remediation. Reports issued by the
external auditors, including the Office of
Auditor General, also contain issues and
recommendations for which university
management must provide corrective action
plans.
The OIA monitors audit issues via an in-
house developed application. We follow up
on items based on the management
determined anticipated completion dates.
During the 2010 fiscal year, the Office of
Internal Auditing reported 24 issues
originating from internal audit reports and
the State Auditor General’s Operational
Audit. As of June 30, 2010, 1 item
remained open, 1 was in process and
management effectively closed or resolved
96% of all items.
Figure 8 - Open Issues and Follow Up
Audit Issue Status As of June 30, 2010
Critical High Moderate Low Unrated Current
Total Previous
Total
Open 1 1 1
Risk Accepted 2 3 5 5
In Process 1 1 6
Resolved 3 5 8 10
Closed 1 15 15 3 6 40 33
Total 1 18 23 6 7 55 55
% Closed 100% 83% 71% 100% 86% 80% 66%
% Closed or Resolved 100% 100% 95% 100% 86% 96% 86%
2010 Annual Report
14 Office of Internal Auditing | University of North Florida
FRAUD ALLEGATIONS & INVESTIGATIONS
The National Association of College and
University Business Officers (NACUBO)
provided whistleblowing guidelines in its
Advisory Report 2003-3, “The Sarbanes-
Oxley Act of 2002: Recommendations for
Higher Education.” Although SOX is not
required for colleges and universities,
NACUBO recommends the following based
on SOX section 301:
“NACUBO recommends that institutions
publicize the complaint mechanism and
have it periodically reviewed by the audit
committee.” Also, “Colleges and
universities should also consider
establishing hot lines, anonymous voicemail,
and anonymous e-mail or secure suggestion
drop boxes to facilitate the complaint
process. Regardless of the specific
mechanisms selected, there should be a
process for communicating with employees,
receiving information, and addressing
identified concerns.”
The Office of Internal Auditing maintains
the anonymous fraud reporting mechanism
on behalf of university management and
governance entities. The current reporting
mechanism is comprised of an internet form
that allows users to anonymously submit
allegations of fraud, waste or abuse.
During the year, the hotline received 7
correspondences, 2 of which were actual
allegations of fraud and 5 that were
customer service complaints and not
appropriate for the hotline.
Figure 9 - Fraud Hotline Activity
Allegation Category Total
Fraud Allegation 2
Customer Service 5
Total 7
Each item was disposed of in an appropriate
manner. The OIA provided investigation
assistance for 2 allegations, transferred 1
and assisted students with customer service
related complaints in 4 instances.
Figure 10 - Fraud Hotline Disposition
Allegation Disposition Total
Prelim Investigation 0
Full Investigation 0
Investigation Assistance 2
Transferred 1
Customer Assistance 4
Total 7
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University of North Florida | Office of Internal Auditing 15
QUALITY ASSURANCE & IMPROVEMENT
Standards for the Professional Practice of Internal Auditing, promulgated by the Institute of
Internal Auditors, state that, “The chief audit executive must develop and maintain a quality
assurance and improvement program.” Overall, the program should be designed to enable an
evaluation of the internal audit activity’s conformance to standards and allow an assessment of
the efficiency and effectiveness of the internal audit activity.
In response to this requirement, we developed performance measurements designed as a basis for
evaluating the department’s performance. The measurements include goals for personnel,
productivity, communication, quality and effectiveness.
Figure 11 - Performance Measurements details the performance measurements and results.
Overall, the department achieved a majority of its goals. However, where applicable, we provide
commentary on goals that were not achieved.
2010 Annual Report
16 Office of Internal Auditing | University of North Florida
Performance Measurements
Figure 11 - Performance Measurements
# Measurement Goal/Criteria Target Range Specific Target Actual
Performance
Personnel
1. Non Student staff with college degrees 70% to 100% 75% 100%
2. Non Student staff w/Certified Internal Auditor 60% to 100% 50% 100%
3. Non Student staff with other certifications 50% to 100% 50% 50%
4. Professional development hours/employee 40 to 60 hours 40 hours 50
Productivity
5. Staff Auditor – direct utilization ratio 70% to 80% 75% N/A
6. Senior Auditor – direct utilization ratio 65% to 80% 70% 58%
7. Director – direct utilization ratio 20% to 50% 30% 43%
8. Manage engagements with 20% of budget N/A N/A See below
Reporting/Communications
9. Report turnaround time 5 to 15 days 10 Days 14 Days
10. Finance & Audit Committee communications 4 to 6/year 4 time/year 4 updates
Quality & Effectiveness
11. Client satisfaction survey results 3 to 5 3 4.62
Explanation of missed targets
6) – At the discretion of the Director, the Senior Auditor’s time was allocated to relevant indirect activities such as
assisting with the risk assessment process. This reduced direct time and reported productivity as the risk assessment was
not a direct productivity measurement during the 2010 fiscal year. Assessing risk is an extremely important required
element for any audit department.
8) – One audit project was over budget by an insignificant amount (9 hours), another was moderately over budget and two
were under budget. The net effect was an overall under budget condition.
2010 Annual Report
University of North Florida | Office of Internal Auditing 17
MANDATORY DISCLOSURES
As mentioned previously, the Office of
Internal Auditing’s activities are governed
by standards promulgated by the Institute of
Internal Auditors. These standards require
the reporting of specific items to an
organization’s Board and Senior
Management. The following is a list of
required disclosures not previously
addressed in the body of this document.
Organizational Independence
As required by standard, the Office of
Internal Auditing (OIA) must confirm to the
board, at least annually, the organizational
independence of the internal audit activity.
UNF’s OIA reports administratively to the
President’s Office and functionally to the
Finance & Audit Committee (FAC).
Reporting to the FAC helps promote the
independence necessary for the OIA to
adequately perform its job function.
Impairments to Independence or
Objectivity
If independence or objectivity is impaired in
fact or appearance, the details of the
impairment must be disclosed. There were
no impairments to independence or
objectivity for any engagements performed
during the 2009 – 2010 fiscal year.
Disclosure of Nonconformance
Occasionally circumstances require the
completion of projects/engagements in a
manner that is not consistent with applicable
standards. When this occurs, the OIA must
disclose the nonconformance and the impact
to Senior Management and the Board.
During the 2009 – 2010 fiscal year, there
were no instances in which projects were
performed in a manner that did not comply
with applicable standards.
Resolution of Management’s
Acceptance of Risks
Each audit engagement can potentially
produce items that may pose risks to
university operations. Some items will
require management’s attention while others
may be situations in which management
decides to accept the risk associated with
continuing the current practice. This is
normal in limited circumstances and is often
due to cost/benefit constraints. The OIA is
required to disclose (to Senior Management
and the Board) any situations in which it is
believed university personnel has accepted a
level of residual risk that may not
adequately reduce/mitigate the risk of loss.
There have been no such instances during
the 2009 – 2010 fiscal year.
2010 Annual Report
18 Office of Internal Auditing | University of North Florida
APPENDIX
Audit Report Summary
Audit Name Report Date Reportable
Items
Cash Handling April 30, 2010 0
T2 Application Controls May 17, 2010 2
Parking Services May 17, 2010 6
Purchasing Cards Oct 26, 2009 8
WEBSITE http://www.unf.edu/internal_auditing/
MAIL 1 UNF Drive
Jacksonville, Florida 32224
PHONE 904.620.2851
REPORT FRAUD http://www.unf.edu/internal_auditing/Report_Fraud.aspx
Contact the Office of Internal Auditing